GST Return Under the Composition Scheme

Last Updated at: Mar 03, 2021
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GST Return for Composition Dealers

The Goods and Services Tax is an indirect form of taxation that has dramatically simplified Indian taxation laws. GSTR4 serves as the GST return for composition dealers, which is a scheme offered under the GST regime for certain types of taxpayers. The GST return for the composition scheme must be filed annually now, whereas, until 2018, it was filed every quarter. This article will take a look at the GST annual return for composition dealers, the composition scheme, and why they are important.

  1. What is GSTR4?

  2. Things to Know About the GST Return for the Composition Scheme

  3. Eligibility Criteria for the Composition Scheme under the GST regime

  4. Composition Scheme under the GST Regime

  5. GST returns for composition dealers

What Is GSTR4?

GSTR4 serves as the GST return for composition dealers. Unlike normal taxpayers who file up to three returns every month, composition dealers need to furnish only one return in a year, in the form of GSTR4. Under normal circumstances, the last date for the GST competition return filing is April 30th, following the assessment year. For instance, taxpayers must file the GST return for the composition scheme for the assessment year 2019-2020 by April 30th, 2020. However, this year the dates have been extended due to the unexpected arrival of the coronavirus pandemic. All taxpayers who have opted for the Composition Scheme under the GST regime must file GSTR4. 

GST Registration

Things to Know About the GST Return for the Composition Scheme

  1. The GST portal now offers an offline Excel-based tool to help taxpayers file their annual GSTR4 return on time. The facility for GST composition return filing was added to the GST portal only in August of last year. 
  2. The due date to file the GST return for the composition scheme was extended to 31 August 2020 from 15 July 2020. This will be the new due date for filing GSTR4 returns for the assessment year 2019-2020.
  3. The due date to opt for the composition scheme in the assessment year 2020-2021 by filing form CMP-02 was extended to 30 June 2020. This will apply for taxpayers registered under both Section 10 of the CGST Act and those who will opt-in through the CGST notification that came out on 7 March 2019.
  4. The due date to file form ITC-03 was extended to 31 July 2020 due to the restrictions put in place as a result of the COVID-19 pandemic.
  5. Taxpayers could submit challans and statements via Form CMP-08 for the first quarter of 2020 by 7 July 2020.
  6. Taxpayers need to be very careful while filing the GST annual return for composition dealers as it cannot be revised once filed on the portal. Hence, it is advisable that such dealers take the help of legal experts before filing GSTR4.
  7. Any delay in filing the GST return for composition dealers will attract a late fee of INR 200 per day until the return is filed. However, the maximum fine that can be levied is INR 5000.

Eligibility Criteria for the Composition Scheme under the GST Regime

Businesses that make more than INR 1.5 crore in a year may apply for the Composition Scheme. The threshold was initially set at INR 1 crore per year, which the CBIC later amended to INR 1.5 crores in 2019. The businesses must consider the turnover of all businesses that use the same PAN card in calculating the total annual turnover. The government will consider the aggregate turnover when considering the eligibility of the business for the Composition Scheme. Additionally, only the following type of business entities may opt for the Composition Scheme under the GST regime;

  1. Manufacturers 
  2. Dealers
  3. Restaurants that do not serve alcohol

The following individuals cannot opt for the Composition Scheme under the GST regime;

  1. Manufacturers of ice cream, tobacco and pan masala
  2. Individuals making inter-state supplies
  3. Casual taxpayer
  4. Non-resident taxpayer
  5. Businesses that use an e-commerce operator to supply goods 

Composition Scheme under the GST Regime

Let us now take a quick look at a few things you need to keep in mind about the Composition Scheme. 

  1. Composition dealers must pay tax under the reverse charge mechanism wherever it is applicable. The rate for the supplies produced will be the rate at which the dealer has to pay the GST. Hence, the rate under the scheme cannot be used to pay taxes under the reverse charge mechanism. 
  2. Composition dealers cannot avail of any input tax credit. Better known as ITC for the tax they paid under the reverse charge mechanism.
  3. Such dealers do not have to pay the IGST since they have to pay only the CGST and SGST for the import of services or goods from an unregistered dealer under the reverse charge mechanism.
  4. Composition dealers have to pay tax at a specific rate on their total sales. And must pay tax under the reverse charge mechanism for certain purchases. Hence the total GST payable = tax on supplies + tax on B2B transactions (reverse charge) + tax on unregistered dealer B2B purchases + tax on import of services
  5. Unlike a normal taxpayer, composition dealers do not have to maintain detailed records of all their financial transactions. They must issue bills of supply and not tax invoices, as the dealer pays the tax out of their pocket. Such dealers cannot recover the GST paid from their customers.

GST Returns for Composition Dealers

Composition dealers need to file the following returns under the GST regime.

  1. Taxable individuals must pay tier taxes via a challan-cum-statement from 2019 onwards in the form of CMP-08.
  2. From the assessment year 2019-2020, the frequency of filing GSTR4 has been changed from a quarterly to an annual basis.
  3. Filing of GSTR-9A will continue to apply with certain exemptions for assessment years 2017-2018 and 2018-2019.